Savitzky-Golay Filtered Chande Momentum Oscillator

The Savitzky-Golay Filtered Chande Momentum Oscillator indicator is a modified momentum tool designed to detect market trends and potential mean reversals by combining digital signal processing with classic oscillator mechanics. It enhances the standard Chande Momentum Oscillator (CMO) by applying a Savitzky-Golay filter to price data, resulting in smoother readings and reduced noise for clearer technical analysis.

Usage

The tool serves as a dual-purpose indicator for both trend-following and identifying retracements.

• Trend Tracking: The oscillator line changes color based on direction. A bullish color (matching the chart foreground) indicates upward momentum, while a bearish color (red) indicates downward momentum.
• Mean Reversal Signals: Vertical background highlights appear when the momentum shifts within key zones.
  • Bullish Reversal: A green background highlight appears when the oscillator reverses upward while in the oversold zone (-50 to -80), suggesting a potential long entry or pullback completion.
  • Bearish Reversal: A red background highlight appears when the oscillator reverses downward while in the overbought zone (50 to 80), suggesting a potential short entry or trend exhaustion.
• Oscillator Thresholds: The indicator includes shaded zones between 35, 50, and 80 (and their negative counterparts) to help traders visualize extreme overbought or oversold conditions.

Details

The script functions by first passing the source price through a Savitzky-Golay filter, a method used to smooth data without significantly distorting the signal's timing or shape. After this initial noise reduction, the Chande Momentum Oscillator (CMO) is calculated by comparing the sum of positive and negative price changes over a user-defined length. Finally, an Exponential Moving Average (EMA) is applied to the CMO values to provide a secondary layer of smoothing.

This implementation includes credit to © anieri for the Savitzky-Golay filter coefficients.

Settings

• Source: The price data used for the calculation (typically "Close").
• Oscillator Length: The lookback period used for the CMO calculation.
• Oscillator Smoothing: The length of the EMA applied to the raw CMO for final output smoothing.

FAQ

How do I access the Savitzky-Golay Filtered Chande Momentum Oscillator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What is the difference between this and a regular CMO?

The standard CMO is often volatile and reactive to noise. This version uses Savitzky-Golay digital filtering and EMA smoothing to provide a more stable line that is easier to use for trend identification.

What do the background colors represent?

The background colors highlight specific "momentum reversals" from extreme areas. Green indicates an upward turn from oversold levels, while red indicates a downward turn from overbought levels.